Illinois Hospital Property Tax Exemptions Remain In Place, For Now

By Gary Smith

07/17/2018

Hundreds of hospital property tax exemption requests remain on hold while the Illinois Supreme Court decides a case involving the constitutionality of a 2012 law that created an easier path for hospitals to acquire tax-exempt status.

The case, brought by a Cook County property taxpayer, alleges that the 2012 law, which states that hospitals “shall be issued a charitable exemption” if the value of qualifying services and activities listed in the law exceeds what the hospital would expect to pay if its property were on the tax rolls violates the Illinois constitution. Under the constitution, hospitals can qualify for property tax exemptions only when the properties are used “exclusively” for “charitable purposes.”

Qualifying services, in regards to the 2012 law, include charity care, subsidies for health-care services for the poor, the difference between the cost of care and what Medicaid pays, and community education programs.

Previous Attempts to Strike Down Law Have Failed

This case has attracted attention from national groups, including the American Hospital Association, which filed documents in the case that said the high court, if it struck down the existing 2012 Illinois law, would set a precedent that could make it harder for modern hospitals to hold onto their tax-exempt status.

If the 2012 law is struck down by the Illinois Supreme Court, that doesn’t necessarily mean all hospitals will have to pay property taxes. Instead, the fate of those property-tax exemptions would revert back to the Illinois Department of Revenue, which, in evaluating the worthiness of those tax-exemption requests, would have the latitude to grant or deny them.

Hospitals that currently have been provided property-tax exemptions under the 2012 law still maintain those exemptions while the court is deciding.

Previous courts have sided against the property taxpayer in this case. The challenge to the law was denied by a Cook County Circuit judge and the 1st District of the Illinois Appellate Court ruled the law constitutional in December 2016.

In March 2017, the Illinois Supreme Court handed down a decision in another case that questioned the constitutionality of that 2012 law. That case, which was the Carle Foundation Hospital in Urbana, Ill., was sent back to the lower court on a technicality, leaving no hint to how the court might decide the current case before them.